I am really incompetent to answer this question. I do believe that if you are a businessman most of your money (willingly or unwillingly) will be invested in your own business. The greatest wealth has been made by such businessmen by having a concentrated assets. Azim Premji, Ratan Tata, Birla,….

HOWEVER, if you are not a businessman and you are an employee or a professional like a doctor …you need to create a portfolio. Either you go and create a portfolio OR you invest in a mutual fund. And create a portfolio of mutual funds.

Now is the difficult part. How do you do Asset allocation? Well that is tough.

If you do not want to do too much of thinking and you already have some Lic policies, ppf ,etc. do a SIP in one fund like Hdfc Prudence. It is a rock star among balanced funds and gives returns like an equity fund. Do not do any other investments just keep at it. Surely your IFA will feel worried and may suggest more funds, but believe me this is fine.

As your age increases include some more equity funds – one large and mid cap and one small cap fund. That should take care of ALL your asset allocation. You are likely to be in about 70% in equity and 30% in debt. Of course if you take your Provident fund into account, the balance will tilt in favor of debt, but you can live with it.

When you turn say 60 or when you retire, continue with your Hdfc Prudence fund and redeem all other investments. Let your Hdfc prudence investments continue till you are 70 years of age. All your other investments are now in debt, so you would have gone to about 30% in equities and 70% in debt.

Draw from your debt for day to day expenses….and draw down from your equities when the market has given a sensationally good return…and put that amount into a debt scheme with low volatility and low duration.

Please do not confuse asset allocation to diversification. In a portfolio like this Prashant Jain is handling your diversification, Subramoney has done your asset allocation.



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  1. Subra,

    So considering your post, should my father (2 years away from retirement) start investing in HDFC Prudence Fund?

  2. In principle you are correct.

    But…For a brain used to equity for 40 years… if I were to just track HDFC Pru’s NAV … I’d be driven out of my (limited) wits.

  3. β€œLet every man divide his money into three parts, and invest a third in land, a third in business and a third let him
    keep by him in reserve.” – Talmud, 1200 BC

  4. Does hdfc prudence fund invests less than 65% in equity, if yes won’t it be taxes as a debt fund bringing returns down ?

  5. Sad part is there is no debt scheme other than PPF which is tax friendly. Not sure if this will continue in future. For retirees, tax is an evil. Having 70% of the funds in debt would invite a lot of tax. One should continue to invest in PPF for as long as possible. This is perhaps the best form of debt investing.

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